What if?...(an AMR thread)

[jerslice]

What If…

While I think AMR and at least AA will eventually pull out of Chapter 11 at some point back into a stable situation, I was thinking this morning about what would happen to ORD/DFW if AA does go belly up and flew off into the history books.

Both airports are enormous, well placed in the middle of the US, and serve large and diverse populations. What would happen to the fields themselves, who would move in on the empty terminals/gates (if anyone)?


My guess is that ORD would eventually be fine: UA could turn OHare into a UAL fortress ala AA/AE’s former DFW hub…or other airlines long wanting to serve Chicago more could buy up more and more vacated T3 space in what could be a bidding blood bath.


DFW could be a major power vacuum for awhile. AMR uses something like 70% of the gates on the field (and I’d imagine an even higher percentage of traffic overall) – that would be hard to fill up quickly. I guess DL could move back in as a hub too since bailing in 2005.

Anyone else want to hazard some guesses?

[megatop412]

I think it was on here that I was reading about how US ops at LGA have declined significantly, and I think that part of what I read also mentioned PIT- PIT was a major US site back in the 90's, I remember going through there and it was as busy as PHL is today, and today they are pretty quiet.

With both DFW and ORD being major Int'l destinations I can't see them going the way of PIT. Didn't Quantas just start SYD-DFW nonstops with the -400ER? Then again, ATL might be close enough to facilitate the loss of traffic at DFW. ORD however, will always be a busy field.

All speculation.....

[mirrodie]

AMR is prime for takeover with this Chapter 11. And the filing may be a way of luring a buyer.

[steve1840]

I think it was on here that I was reading about how US ops at LGA have declined significantly, and I think that part of what I read also mentioned PIT- PIT was a major US site back in the 90's, I remember going through there and it was as busy as PHL is today, and today they are pretty quiet.

With both DFW and ORD being major Int'l destinations I can't see them going the way of PIT. Didn't Quantas just start SYD-DFW nonstops with the -400ER? Then again, ATL might be close enough to facilitate the loss of traffic at DFW. ORD however, will always be a busy field.

All speculation.....

I remember flying through PIT many times when it was one of USAirways biggest hubs. Kinda bummed that its not that busy of an airport anymore. Also, what will become of Miami if AA goes by the wayside? They occupy over half of MIA.


AMR is prime for takeover with this Chapter 11. And the filing may be a way of luring a buyer.

I don't think they will get taken over, but if they do, it better NOT be Delta.

[MarkLawrence]

I agree with Jeremy that UA would succeed at ORD should AA fail - but - DFW is an issue should AA not succeed - and - MIA would be too. With regard to DFW - Delta used to be a large presence there - and - they might take that back - but - MIA would be an issue - it's very close to ATL, so I don't think DL would step in there. UA now has close (relatively) major hubs with ORD, IAH, IAD - who else is there that would step in?

[seahawks7757]

I don't think they will get taken over, but if they do, it better NOT be Delta.

Honestly the DoJ would never let that fly, it would make them too big. Look at how they denied the T-Mobile and AT&T Merger.

[T-Bird76]

Guys AA is no where close to going under. Chapter 11 filings doesn't mean the doors will be closing anytime soon. AA is flush with cash, over 4 billion and has enough cash flow through 2012/13 to remain flying even without the Chapter 11 filing. However their long term prospects of profit simply were no longer viable with their high cost structure. The Chapter 11 doesn't make them more of a target for a takeover then they were last week when their stock was tanking. They need to get their house in order from all levels. Arpey in my opinion waited far to long to clean things up, he divided labor and management to the point Chapter 11 was the only solution.

[NIKV69]

Guys AA is no where close to going under. Chapter 11 filings doesn't mean the doors will be closing anytime soon. AA is flush with cash, over 4 billion and has enough cash flow through 2012/13 to remain flying even without the Chapter 11 filing. However their long term prospects of profit simply were no longer viable with their high cost structure. The Chapter 11 doesn't make them more of a target for a takeover then they were last week when their stock was tanking. They need to get their house in order from all levels. Arpey in my opinion waited far to long to clean things up, he divided labor and management to the point Chapter 11 was the only solution.

Tommy much summed it up here. Once they shed the old aircraft and get a more fuel efficient fleet and trim the fat they should be fine. Biz base is too big and they will be able to compete in the fare wars for reg pax without going into debt.

[hiss srq]

I am going to hazard a few educated guesses here with relation to American Airlines, the first one being, Airbus injects a few hundred million on a loan to save their own order (Ala US Airways) from meeting the scrap heap of a restructure, the other one being that as part of the reorg. Eagle is going to be put on the bid block and will go at a fire sale rate to either Republic or ASA/Skywest/Expressjet (whatever the hell they call themselves today) on a direct risk operating contract to fly the Eagle brand. They will kill a ton of domestic lift in the midwest by offing the MD's as fast as possible and start refocusing their 4 corners operations (LAX, SFO, JFK/LGA and MIA) where they have a huge premium market choke hold and start chasing Asia as far as Delta goes. Not to mention, they will renegotiate the brand new pilot contract to keep a B scale but shutter alot of the pension clauses. They don't really need to furlough pilots though as they have pretty much garunteed a departure in droves to save their pension funds now. Those who opted for plan B which was a stock option program are screwed in any event. I don't see anyone wanting to take that big a bite. Not even Parker would touch the amount of risk that an American buy out would create. FYI, interesting note, last night AA was valued at 825 million dollars. Talk about cheap!

[Art at ISP]

Don't underestimate Parker. His ego gets in the way of his judgement on a regular basis. That said, I don't think it's in anyone's best interest (except Parker's) for AA and US to get together...he'll just ruin another, yet larger, airline. He's already over his head with US.

With regard to Mario's comment, they are not doing debtor in possession, and as Tommy said they have plenty of cash, meaning a takeover (hostile or otherwise) is much less likely, but I'd never say impossible. I think AA can shed aircraft and contracts and come back leaner and meaner through this process......and agree Arpey waited much too long. I think he alone was opposed to the BK, and probably "retired" to get out of the way....

[hiss srq]

Let's not forget though, while there is not a tremendous amount of market overlap for the airlines in question, it would represent almost 1/3 of the total air lift in the USA if these two carriers came together, I think that the DOJ would shoot it down in any event as in the event of a failure it would provide for a catastrophic loss of available seats in many markets and ultimately would hurt the industry overall.

Also, something I forgot to mention about this bankruptcy is that as a result of the bankruptcy laws of 2005, there are many more restrictions to what can and cannot be done in a bankruptcy proceeding which is why American did it now with 4.3 billion cash in hand. They are essentally providing their own DIP so to speak by doing this. Kind of smart actually, the ones who are going to get "hurt" the most are the pilots. The new contract was a major trigger. I am just outside quarterbacking it here but a few things I observe that could be part of why now and how. The ratification of a new pilot contract that would put extensive finacial duress on the company given the average age and seinority of pilots in the AA system, with exception to the call backs recently and the flowthroughs that are flying on the mainline side now who came from Eagle, most of the pilots at AA are north of 25 years seinority at this time. That represents a tremendous burden to the company just to make payroll if you look at the various contact rates at American. The other issue is the return of B scale. American want's 100 seater on property in the worst way, pre return to B scale this was not possible in a finacially responsible form. At the same time, Scope clauses prevented AA from buying a bunch of 175's and 190's and giving them to Eagle. (A positive for the pilots and the company) With the advent of B scale, they are now going to be free to shead Eagle, shead the MD-80's which from what folks more familiar with the airlines inner workings tell me are a tremendous drain on their operating cost due to relative age of the pre TWA birds and the comparative fuel economies of a 737-800.

Once they can start flying something more right sized like a 190 or C series, they can effectively manage yeild and load factor and how it effects CASM RASM and PRASM on those markets. In otherwords, when AA emerges from 11 they are going to be extremely robust, and quite likely larger than before while remaining on the plus side of the profit curve. Lets see what happens. I have my popcorn ready because I think it is going to be a fast and action packed Ch11 for American with very interesting restructuring decisions in terms of fleet planning, employee relation management and route restructure.

[seahawks7757]

Tommy much summed it up here. Once they shed the old aircraft and get a more fuel efficient fleet and trim the fat they should be fine. Biz base is too big and they will be able to compete in the fare wars for reg pax without going into debt.


That's not the point though, this thread is not about what is going to happen, but what could happen, using your imagination to what ever you want to put could happen in the absolute worse case.

[NIKV69]

That's not the point though, this thread is not about what is going to happen, but what could happen, using your imagination to what ever you want to put could happen in the absolute worse case.

Sorry, maybe Hooters could make a comeback? Complete with topless FAs. The could take over those routes and charge more in fares to see hot women with no clothes on serving them? Think of the possibilities!

[seahawks7757]

Maybe for you, that wouldn't do a thing for me.

[T-Bird76]

Maybe for you, that wouldn't do a thing for me.

LOL Me either. I'd rather have them fill the plane with shirtless guys. LOL

The end of the day is AA isn't going anywhere.

[NIKV69]

LOL Me either. I'd rather have them fill the plane with shirtless guys. LOL

I don't know I remember that guy who tried to sue to be a Hooters girl and he wasn't that attractive.


The end of the day is AA isn't going anywhere.

More so they will become a force. If they get the unions in line, new fleet and some good management they will kick butt. Without having to merge with anyone.

[hiss srq]

The first round of moves on American's part have been made. They just rejected the leases on 35 narrow bodies. Mostly MD-83's and a handful of Fokker 100's that they were still paying lease on.

[T-Bird76]

Here's a very good read on AA's Chapter 11 filing. Really puts things into perspective and dispels many of the rumors.

http://www.aviationplanning.com/Images/AMR%20Bankruptcy%20-%20Time%20For%20Reality.pdf

[NIKV69]

Here's a very good read on AA's Chapter 11 filing. Really puts things into perspective and dispels many of the rumors.

http://www.aviationplanning.com/Images/AMR%20Bankruptcy%20-%20Time%20For%20Reality.pdf

Good find. My favorite part There is not much market for used MD-80s, and it is likely that any
pressure to reduce lease payments would be successful

Ya think?


Basically that analysis used a lot of fancy words to say what everyone knew. AA was like GM. Being crippled by a union and unfunded pension whose cost to fly people was higher than everyone else. While having to match low fares with airlines that already declared bankruptcy and shed the dead wood and were now stronger than AA was.